66 Annual Report 2019 Governance 68 Our Board and disclosures 70 Corporate governance framework 77 Managing risk 79 Acting ethically 81 Diversity and inclusion 85 Remuneration and performance 91 Disclosures 99 Glossary

Annual Report 2019 67 Our Board

Patrick Strange Jon Hartley Mark Cross Prue Flacks BE (Hons), PhD BA Econ Accounting BBS (Accounting & LLB, LLM (Hons), Fellow ICA Finance), CA Chair Director since (England & Wales), Director since 6 April 2015 Director since 1 December 2011 Independent Associate ICA (Australia), 1 November 2016 Independent Fellow AICD Independent Patrick has spent 30 years Prue is a professional director working as a senior executive Deputy Chair Mark has extensive corporate with experience across a and director in both private Director since finance experience, both range of industries. and listed companies, 1 December 2011 as a professional director Prue was formerly a including more than six Independent and consultant, and during commercial lawyer and a years as Chief Executive his earlier investment Jon is a chartered partner in the national law of Transpower where he banking career. accountant and fellow firm Russell McVeagh for oversaw Transpower’s of the Australian Institute Mark has held senior 20 years. Her expertise $3.8 billion of essential of Company Directors. positions with Deutsche Bank included corporate and investment in the National in London and Australia, regulatory matters, corporate Grid. Patrick is currently He has held senior roles and prior to that at Lloyds finance, capital markets chair of Auckland across a diverse range of Corporate Finance/Southpac and business restructuring. International Airport, commercial and not for Corporation in Australia and a director of Mercury NZ, profit organisations in several Prue is currently a director New Zealand. and on the Board of countries, including as chair of Bank of New Zealand Essential Energy Australia. of SkyCity, deputy chair of Mark is currently chair of and Mercury NZ, and chair ASB Bank and Sovereign Milford Asset Management, of Queenstown Airport Patrick is chair of our Assurance Company, MFL Mutual Fund and Corporation. She is a Nominations and Corporate director of Mighty River Superannuation Investments, chartered member of the Governance Committee. Power, a trustee of World and a director of Z Energy. Institute of Directors. Vision New Zealand, CEO He is also a former director Prue is chair of our People, of Brierley New Zealand of Genesis Energy and Performance and Culture and Solid Energy, and CFO Argosy Property. of Lend Lease in Australia. Committee and on our Mark is a member of Nominations and Corporate Jon is currently chair of Chartered Accountants Governance Committee. Timberlands, VisionFund Australia and New Zealand International and the and a chartered member Wellington City Mission. of the Institute of Directors. Jon is on our Audit and Risk Mark is on our Audit and Risk Management Committee Management Committee. and our Nominations and Corporate Governance Committee.

68 Annual Report 2019 Our Board and management are committed to ensuring our people act ethically, with integrity and in accordance with our policies and values.

Murray Jordan Jack Matthews Kate McKenzie Anne Urlwin MProp BA Philosophy, College BA, LLB BCom, FCA, CFInstD, of William and Mary MAICD, FNZIM, ACIS Director since Managing Director 1 September 2015 Director since 1 July 2017 since 20 February 2017 Director since Independent Independent Non‑independent 1 December 2011 Independent Murray has extensive Jack is an experienced Kate is currently CEO experience in the director who has held a of Chorus and has an Anne has extensive management of highly number of senior leadership extensive communications directorship experience customer focused positions within the media, infrastructure background across many sectors, organisations and in telecommunications and including many years with including energy, health, navigating extremely technology industries in Telstra in Australia where she construction, regulatory complex environments, Australia and New Zealand. was Chief Operations Officer services, internet including as managing for three years, responsible infrastructure, research, Jack has extensive director of Foodstuffs North for Telstra’s field services, banking, forestry and telecommunications Island, one of New Zealand's IT and network architecture the primary sector, as industry experience having largest companies. and operations. Prior to well as education, sports been CEO of TelstraSaturn that, Kate held other senior administration and the arts. Murray has also previously during the period they positions at Telstra including held various general manager deployed their HFC network Anne is a director of Tilt Group Managing Director, positions at Foodstuffs and in New Zealand, as well as Renewables, City Rail Innovation, Products and management roles in the a former director of Crown Link, Southern Response Marketing, Group Managing property investment and Fibre Holdings, the Crown Earthquake Services, Steel Director, Wholesale, and development sectors. He is a agency overseeing the & Tube Holdings, OnePath Group Managing Director, director of Metcash Limited, rollout of New Zealand’s Life (NZ), and Summerset Regulatory, Public Policy and an ASX listed company, fibre infrastructure network. Group Holdings. Anne is also Communications. SkyCity and Stevenson independent chair of the Formerly, Jack was CEO Group, and a Board trustee of Prior to joining Telstra, Ngāi Tahu Te Rūnanga Audit of Fairfax Media’s Metro Starship Foundation. Kate was a CEO in the and Risk Committee, the Division, CEO of Fairfax NSW Government of the former chair of commercial Murray is on our People, Digital and Chief Operating Departments of Commerce, construction group Performance and Culture Officer of Jupiter TV (Japan). Industrial Relations and the Naylor Love Enterprises, Committee. Jack is currently the chair Workcover Authority. Lakes Environmental, the of MediaWorks, a director New Zealand Blood Service, Kate is currently on the Board of Plexure Group, and a internet domain name of Allianz, having previously former director of The registry operator NZRS and a been on the Boards of Foxtel, Network for Learning, APN former director of Meridian Sydney Water, Reach, CSL Outdoor Group and Trilogy Energy. and Workcover. She is also a International. member of Chief Executive Anne is chair of our Audit Jack is on our People, Women and has had a long and Risk Management Performance and Culture history of involvement in Committee. Committee. promoting the interests of indigenous communities.

Annual Report 2019 69 Corporate governance framework

As a New Zealand company listed on the NZX our corporate Board membership governance policies and practices meet or exceed the Our Board’s skills, experience and composition support standards of that market. We have adopted and fully effective governance and decision making, positioning it followed the recommendations set out in the NZX Corporate to add value. Governance Code. Supported by the Nominations and Corporate Governance 1 Although we have an ASX “foreign exempt” listing status we Committee (NCGC) our Board regularly assesses its also continue to take the ASX Corporate Governance Code composition utilising a skills matrix and annual evaluation into account in our governance practices and policies. processes. Training is provided or recruitment undertaken Our Board regularly reviews and assesses our governance if new or additional skills or experience is required. This policies, processes and practices to identify opportunities ensures diversity of thought, skills and expertise and that for enhancement. our Board remains aligned with our strategic direction. Our corporate governance practices are outlined on the As at 30 June 2019 we had eight directors (seven following pages and in our Corporate Governance Statement independent directors and the managing director). available at www.chorus.co.nz/governance. Directors are not appointed for specified terms. However, Key corporate governance documents are also available the NZX listing rules require directors to retire at least once at www.chorus.co.nz/governance. every three years. We recognise that women and ethnic minorities are Our Board’s role still under-represented in the leadership of New Zealand Our Board is appointed by shareholders and has overall businesses and our Board remains actively conscious of responsibility for strategy, culture, health and safety, this in its succession planning. More information on our governance and performance. approach to diversity is set out later in this report.

1 An ASX foreign exempt listing is based on the principle of substituted compliance. This means our primary obligation is to comply with the NZX listing rules (as our home exchange). As a result we do not need to follow or report against compliance with the ASX Corporate Governance Code.

70 Annual Report 2019 Summary1 of our Board’s roles and responsibilities:

Culture • Leading culture “from the top” so our culture is consistent with our values Strategy & • Engaging in ongoing strategy development performance • Overseeing capital allocation • Approving, and reviewing performance against, our strategy and business plans (including capital expenditure and operating budgets) Financial oversight & • Overseeing our accounting and reporting systems and, where appropriate, approving our financial and reporting other reporting • Overseeing and monitoring the performance of internal and external auditors • Overseeing our control and accountability systems • Overseeing long term capital management (balance sheet and dividends) • Setting, monitoring and reviewing our internal audit plan Risk management • Adopting and reviewing Chorus’ risk management framework, including setting the risk appetite • Regularly reviewing principal risk reporting Health & safety • Setting the strategy, culture and expectations in relation to health and safety Board composition & • Reviewing and evaluating Board, Board committee and individual director performance performance • Appointing members to Board committees Governance • Overseeing corporate governance, including reviewing key governance documents • Carrying out the functions specifically reserved to our Board and its committees under Board approved policies and committee charters • Monitoring compliance with our continuous disclosure obligations People • Reviewing and approving remuneration and people strategies, structures and policies • Appointing and removing our CEO, CFO and General Counsel & Company Secretary • Assessing the measurable objectives set for, and progress towards achieving, our diversity and inclusiveness goals Significant transactions • Approving major capital expenditure and business activities outside the limits delegated to management

1 Summary primarily drawn from our Charter but also from other supporting governance documents.

Annual Report 2019 71 Figure 11: Figure 12:

Director tenure Board gender diversity

25% 38% 38% 62%

37%

0–3 years Female 3–6 years 6+ years Male

Director Appointed Last elected at ASM

Prue Flacks 2011 2017

Jon Hartley 2011 2017

Anne Urlwin 2011 2018

Murray Jordan 2015 2018

Patrick Strange 2015 2018

Mark Cross 2016 2016

Jack Matthews 2017 2017

Kate McKenzie 2017 2017

Mark Cross is retiring by rotation and standing and project management. With the success of the build, for re-election at our 2019 ASM. we are increasingly focused on connecting customers and their experience as well as future connectivity and Our Board has determined that collectively its innovation opportunities. The Board considers it is directors have a broad range of managerial, financial, important to balance both specialist expertise and the accounting and industry skills and experience in ongoing need for strong general commercial expertise. the key areas set out on the following page. The following table reflects the strengths of the current As the Chorus business evolves, so too does the Board. Board based on a mix of key skills and experiences as are Chorus’ beginnings were focused on infrastructure build currently relevant for Chorus.

72 Annual Report 2019 Skill/experience Description Combined Board

Capital markets Experience in, and understanding of, capital markets, market regulation, and investment capital investment and the investor experience

Communications Understanding, expertise and/or experience in communications connectivity, connectivity and adopting new technologies, leveraging and implementing technologies technology

Governance – Experience with, and a commitment to, high corporate governance standards financial, audit, including in listed companies legal, listed company Understanding financial business drivers, and/or experience implementing or overseeing financial accounting, external reporting and internal financial controls

Physical infrastructure Experience in leading, and/or understanding of, physical infrastructure and operations operations, including contracting including contracting, Commitment and experience in management of workplace safety safety and risk Experience anticipating and identifying key risks and monitoring the effectiveness of risk management frameworks and controls

Governance – Executive experience in leading large businesses, developing and implementing executive experience strategy and strategic objectives, assessing business plans and driving execution in large businesses

Infrastructure Understanding the current and developing regulatory environment, complexities regulation and actual and potential impacts

Expertise identifying and managing legal, regulatory, public policy and corporate affairs issues

Customer Experience in customer-led transformation, customer focus and/or customer experience centric organisations

Substantial experience Moderate experience Some experience

Annual Report 2019 73 Appointment Our Board also formally engages in annual: Our Board may appoint additional directors to our Board or to • Reviews of our Board chair and deputy chair, and chairs fill a casual vacancy. of our standing Board committees; The independence, qualifications, skills and experience • Confirmations of our Board chair and deputy chair, and needed for the future and those of existing Board members are chairs of our standing Board committees; and reviewed before appointing new directors. External advisors are also engaged to identify potential candidates. • Performance discussions of individual directors standing for re‑election. To be eligible for selection, candidates must demonstrate appropriate qualities and satisfy our Board they will commit the In addition to Board performance reviews, our Board time needed to be fully effective in their role. takes a forward focused approach to future Board capability, composition and the potential contribution of each Appropriate checks are undertaken before a candidate is existing director. appointed or recommended for election as a director, including as to the person’s character, experience, education, criminal An external review of Board, individual director, and record and bankruptcy history. standing Board committee performance commenced in the reporting period. Shareholders may also nominate candidates for appointment to our Board. In addition, under the agreements entered into with Independent advice CIP relating to our UFB programme, CIP is entitled to nominate A director may, with our chair’s prior approval, obtain one person as an independent director (they have never used independent professional advice (including legal advice) this right). Should this occur, our Board must consider this and request the attendance of advisers at Board and Board nomination in good faith, but the appointment (and removal) of committee meetings. any such person as a director is to be made by shareholders in the same way as other directors. Independence We have written agreements with each non-executive All our directors are independent directors except for Kate director setting out the terms of their appointment, including McKenzie, our CEO and managing director. obligations and responsibilities, compliance with our policies For a director to be considered independent our Board must (including code of ethics and securities trading) and ongoing affirmatively determine he or she does not have a disqualifying professional development. relationship as set out in our Board charter. These disqualifying relationships reflect those set out in the NZX listing rules and Director induction and professional development NZX and ASX corporate governance codes. Our director induction programme ensures new directors are appropriately introduced to management and our business, Our Board has not set financial materiality thresholds for acquaints directors with relevant industry knowledge and determining independence but considers materiality in the familiarises them with key governance documents and context of each relationship and from the perspective of the stakeholder relationships. parties to that relationship. Our directors are expected to continue ongoing professional Delegation of authority development to ensure they maintain appropriate expertise Our Board has overall responsibility for strategy, culture, to effectively perform their duties. health and safety, governance and performance. We hold dedicated Board education sessions covering a Implementation of our Board approved strategy, business range of topical matters, both technical and cultural. plan and governance frameworks, and responsibility for Visits to our operations, briefings from key management, developing our culture and health and safety practices, is industry experts and key advisers, together with educational delegated by the Board to management through the CEO. and stakeholder visits, are also arranged for our Board. As such our CEO (with the support of her executive team) is responsible for Chorus’ day-to-day management, operations Review and evaluation of Board performance and leadership, reporting to the Board on key performance, Our Board uses internally and externally facilitated management and operational matters. performance and evaluation processes overseen by our NCGC. As part of this process our chair meets with directors Our CEO sub-delegates authority to her executive team and individually to discuss performance. they sub-delegate their authority to other Chorus employees within specified financial and non-financial limits. Formal policies and procedures govern the parameters and operation of these delegations.

74 Annual Report 2019 Three standing Board committees also assist our Board in Board committees carrying out its responsibilities. Some Board responsibilities, Board committees assist our Board by focusing on specific powers and authorities are delegated to those committees. responsibilities in greater detail than is possible for the Other committees may be established and specific Board as a whole. Each standing Board committee has a responsibilities, powers and authorities delegated to those Board approved charter and chair. Committee members are committees and/or to particular directors. appointed by our Board.

Audit and Risk Management Committee

Our Chorus People, Performance and Executive Our CEO Shareholders Limited Board Compensation Committee Team People

Nominations and Corporate Governance Committee

Audit and Risk Management Committee (ARMC)

Role Our ARMC assists our Board in overseeing our risk and financial management, accounting, audit and financial reporting Members Anne Urlwin (chair), Jon Hartley, Mark Cross Independence All committee members are independent directors Responsibilities • Overseeing the quality and integrity of external financial reporting, financial management and internal controls • Regularly reviewing principal risk reporting • Recommending to our Board the appointment, and if necessary removal, of the external auditor • Assessing the adequacy of the external audit and independence of the external auditor • Reviewing and monitoring the internal audit plan and reporting • Overseeing the independence and objectivity of the internal audit function • Reviewing compliance with applicable laws, regulations and standards

People Performance and Culture Committee (PPCC)

Role Our PPCC assists our Board in overseeing people, culture and related policies and strategies Members Prue Flacks (chair), Murray Jordan, Jack Matthews Independence All committee members are independent directors Responsibilities • Reviewing people and remuneration strategies, structures and policies • Approving annual remuneration increase guides and budgets • Reviewing candidates for, and the performance and remuneration of, our CEO • Approving, on the recommendation of our CEO, the appointment of our CEO’s executive direct reports (except our CFO and General Counsel & Company Secretary whose appointment is approved by our Board) • Reviewing our CEO’s performance evaluation of her executive direct reports • Developing and annually reviewing and assessing diversity and its reporting • Overseeing recruitment, retention and termination policies and procedures for senior management • Making recommendations (including proposing amendments) to our Board with respect to senior executive (including CEO) incentive remuneration plans • Annually reviewing non-executive director remuneration

Annual Report 2019 75 Nominations and Corporate Governance Committee (NCGC)

Role Our NCGC assists our Board in overseeing and promoting continuous improvement of corporate governance at Chorus Members Patrick Strange (chair), Jon Hartley, Prue Flacks Independence All committee members are independent directors Responsibilities • Identifying and recommending suitable candidates for appointment to our Board and Board committees • Reviewing the size, independence, qualifications, skills, experience and composition of our Board • Developing, reviewing and making recommendations to our Board on corporate governance principles • Establishing, developing and overseeing a process for the annual review and evaluation of Board, Board committee, and individual director performance • Developing and reviewing Board succession planning (including for the Board chair) • Monitoring compliance with our codes of ethics and managing breaches of the Director Code of Ethics • Reviewing and overseeing director induction and ongoing professional development

Board and Board committee meeting attendance in the year ended 30 June 2019

Regular Other ARMC PPCC NCGC DDC4 Board Board meetings meetings1 Total number of meetings held 8 2 4 5 1 5 Patrick Strange2 8 2 1 Jon Hartley 8 2 3 1 Mark Cross 8 2 4 Prue Flacks 8 2 5 1 Murray Jordan 8 2 5 Jack Matthews 8 2 5 Anne Urlwin 8 2 4 5 Kate McKenzie3 8 2 5

Notes: 1 Includes dedicated Board education, and strategy and business planning, meetings. Directors also have at least two health and safety site visits each year. 2 Patrick, as Board chair, typically attends Board committee meetings. As he is not a formal member of those committees that attendance is not noted in the table. 3 Kate McKenzie is not a member of any of the Board committees but attended all committee meetings as CEO and an observer. 4 A Due Diligence Committee was established to oversee our NZX $500 million bond issued in December 2018.

76 Annual Report 2019 Managing risk

Like all businesses, we are exposed to a range Principal risks of risks. Our risk management activities aim Principal risks are our key risks. These are assessed on a risk to ensure we identify, prioritise and manage profile identifying likelihood of occurrence and potential key risks so we can execute our strategies and severity of impact. Current principal risk categories are identified via a comprehensive enterprise risk management achieve our goals. framework encompassing financial and non-financial risks. They include, anticipating and responding to: Risk management No business can thrive without taking on risk. Effective risk • Customer/market risks: customer service and experience; management is about informed risk taking and appropriate revenue growth and market changes; and active management of risks. • Operational risks: e.g. network and IT quality, availability We seek to understand and respond to our current and and resilience; delivering effective and quality outcomes future business environment, and to actively seek and (including with service partners); labour market risks; robustly evaluate opportunities and initiatives which protect • People & culture: e.g. health & safety; engagement; and achieve our business strategies. We strive to understand, capability; talent and change management; meet and appropriately balance stakeholders’ expectations to deliver value to shareholders and a sustainable environment • Regulatory risks and broader societal expectations: for Chorus in the long term. e.g. working within the regulatory and legal environment, and broader societal expectations; Our Board • Capital management: e.g. working within appropriate Our Board is ultimately responsible for risk management capital management settings. governance: Our climate change risks are reviewed as part of our • Annually setting risk appetite and tolerances and reviewing operational risks (see the Enabling Climate Action section principal risks; on page 14 and 15). • Approving and regularly reviewing our Managing Risk Policy and supporting framework; Risk management processes Our Managing Risk Policy sets out how we manage • Promoting a culture of proactively managing risk; and our risks, including by: • Through our ARMC, providing risk oversight and monitoring. • Having a single risk management framework; Risk appetite • Providing the CEO and executive team with discretion to Our risk appetite sets our tolerable levels of risk. It forms manage risk within the guidance provided in our framework; a dynamic link between strategy, target setting and risk • Balancing the level of control implemented to mitigate management and sets boundaries for day-to-day decision identified risks with our commitment to comply with making and reporting. external regulation and governance requirements and Chorus’ value and growth aspirations; and • Meeting good practice standards for risk management processes and related governance.

The risk and control environment 1. Risk identification and description 5. Annual risk reviews – Risk identification and description – Completeness, – Recording principal risks accuracy and validity of principal risks 2. Risk assessment and ratings – Effectiveness of the risk management – Risk assessment (likelihood and impact) process – Risk ratings (critical, high, medium, low)

Assurance 3. Risk mitigations Management assurance Independent assurance – Risk responses – Action plans (including internal audit, – Mitigating controls external audit)

4. Regular risk reporting

– Mitigation status – Current and potential risks – Risk trends – Action plan status

Annual Report 2019 77 Principal risks are owned by relevant executives. This Our Manager Risk & Business Assurance has a management promotes integration into operations and planning and a reporting line to our General Counsel & Company Secretary culture of proactive risk management. Notwithstanding and a direct reporting line to our ARMC. individual ownership, our CEO and executive hold collective responsibility for considering how risk and events interrelate External auditor and for managing our overall risk profile. Our Board and ARMC monitor the ongoing independence and quality of our external auditor. Our ARMC also meets Principal risks are reported to our ARMC quarterly and, if with our external auditor without management present. necessary, also by exception. Principal Risk owners support the regular reporting from the Manager of Risk & Business Our ARMC charter and External Auditor Independence Policy Assurance by providing “deep dives” on the risks they own. amongst other things: Our ARMC reports to our Board. • Prohibit the provision of certain non-audit services by our Principal risks are assessed with each responsible executive external auditor; and collectively with the executive team before being • Require ARMC approval of all audit and permitted reported to the ARMC. This allows for constructive challenge non‑audit services; and debate. Underlying risk assessment and monitoring practices are undertaken by each principal risk owner with • Require our client services partner and lead/engagement assistance from our Manager Risk & Business Assurance. partner to be rotated every five years (with a five year cooling off period) and other audit partners to be rotated Our Board also receives management and other internal and every seven years (with a two year cooling off period); external reporting over risk positions and risk management operation (including from internal audit plans approved by • Require our ARMC to review our external auditor’s fees half the ARMC) through our overall governance framework. yearly (including the ratio of fees for audit vs. non-audit services); and Our risks are not static. Our CEO and executive regularly seek to identify emerging risks in line with our strategic direction • Impose restrictions on the employment of former external and risk management framework. audit personnel. Before our Board approves the financial statements, our CEO The non-audit services undertaken by our external auditor and CFO provide a certificate as to the appropriateness of KPMG in the year to 30 June 2019 are set out in note 10 of those financial statements the financial statements in this report. Those services were provided in accordance with our ARMC charter and External Internal audit Auditor Independence Policy and did not affect KPMG’s We operate a co-sourced internal audit model with our independence, including because: Manager Risk & Business Assurance supported by external • They were approved only where we were satisfied they advisors PricewaterhouseCoopers to provide additional would not have a material bearing on KPMG’s external resource and specialist expertise as required. audit procedures; and The responsibilities of our internal audit function include: • They did not involve KPMG acting in a managerial or • Assisting our ARMC and Board in their assessment of decision‑making capacity. internal controls and risk management; KPMG confirm their independence via independence • Developing an internal audit plan for review and approval declarations every six months. by the ARMC each year; Our external auditors attend our ASM each year. • Executing the plan and reporting progress against it, significant changes, results and issues identified; and • Escalating issues as appropriate (including to our ARMC and/or Board chairs). Our executive team and ARMC monitor key outstanding internal audit issues and recommendations as part of regular reporting and review, including the timeliness of resolution. Our ARMC has direct and unrestricted access to our internal audit function, including meeting them without management.

78 Annual Report 2019 Acting ethically

Codes of ethics Trading in Chorus securities Directors and employees are expected to act honestly and All non-executive directors are encouraged to hold Chorus with high standards of personal integrity. Codes of ethics shares, It is the Board’s intention that each director will, for our directors and employees set the expected minimum subject to chair discretion, hold at a minimum, shares standards for professional conduct. These codes facilitate equal in value to one year’s, post-tax, director base fees, behaviours and decisions that are consistent with our values, accumulated over the first 3 years in office. business goals and legal and policy obligations, including in All trading in Chorus securities by directors and employees respect of: must be in accordance with our Securities Trading Policy. That • Conflicts of interest; policy prohibits trading in Chorus securities while in possession of inside information and requires, amongst other things: • Gifts and personal benefits; • Directors to notify, and obtain consent from, the chair (or • Anti-bribery and corruption; in the chair’s case, the ARMC chair) before trading; and • Use of corporate property, opportunities and information; • Employees identified as potentially coming across market • Confidentiality; sensitive information (“restricted persons”), to obtain consent from our General Counsel & Company Secretary • Compliance with laws and policies; and (or in our General Counsel & Company Secretary’s case, • Reporting unethical behaviour. our Board chair) before trading. We have communicated our codes of ethics and provided Trading in Chorus shares or NZX listed bonds by directors is training to our directors and employees. Our people are also disclosed to our Board, the NZX and ASX. Trading by “senior encouraged to report any unethical behaviour. All reported managers” is disclosed to the NZX. breaches are investigated. Market disclosures Other policies reinforce the behaviours we expect at We are committed to providing timely, factual and accurate Chorus, including: information to the market consistent with our legal and • Bribery & gifts: Acceptance of bribes, or gifts/other regulatory obligations. benefits which could be perceived as influencing decisions, We have a Board approved Disclosure Policy and a CEO are prohibited under our codes of ethics policies. Our Gifts approved Market Disclosure Policy setting out our disclosure and Entertainment Policy sets out the parameters within practices and processes in more detail. which gifts and entertainment may be accepted and our approval processes for gifts and entertainment over $150. Our disclosure policies are designed to ensure: • Anti-bullying, Harassment and Discrimination: Our Anti- • Roles of directors, executives and employees are clearly bullying, Harassment and Discrimination Policy reinforces set out. our commitment to a psychologically and physically • Appropriate reporting and escalation mechanisms safe working environment including our zero tolerance are established. approach to bullying, harassment and discrimination. • There are robust and documented confidentiality protocols • Whistle blowing and fraud: Our Whistle Blowing and in place where appropriate. Fraud policies allow for confidential reporting of serious misconduct or wrongdoing and suspected fraud or • Only authorised spokespersons comment publicly, within corruption. the bounds of information which is either already publicly known or non-material. While we did not receive any reports of serious instances of unethical behaviour by our employees in the year to Our approach to tax 30 June 2019, we did unfortunately receive reports of We take our tax obligations seriously and work closely with alleged unethical behaviour by some sub-contractors used Inland Revenue to ensure we meet our tax obligations. by our service company partners. As noted earlier in this report, we, and an independent reviewer, fully investigated We obtain external advice and Inland Revenue’s views these allegations. We, with our service company partners, (through informal correspondence, determinations or rulings) have announced the steps we are taking aimed at creating in respect of unusual or material transactions. consistently fair conditions, in line with employment laws, for As we operate only in New Zealand all our tax is paid in all workers in the Chorus supply chain and are committed to New Zealand at the prevailing corporate tax rate (currently doing the right thing by people working on our behalf. 28%). We have paid all taxes we owe and all tax compliance obligations are up to date.

Annual Report 2019 79 Stakeholder engagement

Shareholder engagement Stakeholder survey

We are committed to fostering constructive relationships We conduct an annual survey of a diverse group of stakeholders to gauge perceptions of our performance with shareholders that encourage engagement with us, and identify any matters that may require further attention. including by: These stakeholders include investors and analysts, business • Communicating effectively with them; leaders, central and local government, media, and telecommunications industry organisations. • Giving ready access to balanced and understandable information; • Making it easy for shareholders to participate in general meetings; and • Maintaining an up to date website providing information about our business. Our investor relations programme is designed to further facilitate two-way communication with shareholders, provide them and other market participants with an understanding of our business, governance and performance and an opportunity to express their views. As part of this programme we enable investors and other interested parties to ask questions and obtain information, meet with investors and analysts and undertake formal investor presentations. Our annual and half year results presentations are made available to all investors via webcast. Annual meetings are held in a main centre and webcast to enable shareholders to view and hear proceedings online. We enable shareholders to vote by proxy ahead of meetings without having to physically attend or participate in those meetings and adopt the one share one vote principle, conducting voting at shareholder meetings by poll. Because of the ownership restrictions contained in our constitution, there may be rare circumstances where, in the event that the restriction is breached, our Board may prohibit the exercise of voting rights. More information on our ownership restrictions is included later in this report and in our constitution. We consider that shareholders should be entitled to vote on decisions which would change the essential nature of our business. Shareholders are also able to ask questions of, and express their views in respect of, our Board, management and auditors (including via appointed proxies) at and before annual meetings. We encourage shareholders to communicate with us and our share registrar electronically, including by providing email communication channels and online contact details and instructions on our website.

80 Annual Report 2019 Diversity and inclusion

Our Belonging strategy aims to build an Based on the annual review of effectiveness of our inclusive culture which strengthens our Diversity and Inclusion (D&I) policy and our measurable collective capability, allowing us to attract, diversity metrics and objectives, our Board considers that overall we are making progress towards achieving our identify and retain diverse talent, while D&I objectives and that we have performed well against leveraging the diversity of our people. the policy generally. We continue to consciously focus on this as we support a culture of inclusion at Chorus. We have four key pillars or areas of focus for the work in diversity and inclusion: flexible and adaptable workforce; diverse leadership; wellbeing, and; inclusive culture.

Belonging Strategy Focus Areas

Flexible & adaptable Diverse leadership Wellbeing Inclusive culture workforce

1 2 3 4

Flexible working We provide targeted We build a resilient Our culture is inclusive arrangements including development health and safety of all people the technology and opportunities to support culture by providing infrastructure to enable diversity in leadership a work environment We encourage and value them are made available that is “psychologically different approaches and to our people where Our remuneration safe” with a zero- perspectives, actively possible, supporting and reward strategy tolerance approach to using diversity of thought an agile culture promotes pay equity bullying, harassment to make high quality and discrimination decisions and increase We are open and We focus on our ability to innovate adaptable in our gender diversity in We are a safe approach to requests leadership roles place in which to We celebrate diversity for flexible working raise these issues by participating in arrangements, always We focus on ethnic significant national ensuring business and diversity in leadership Our culture encourages events, with a focus customer experience roles, in particular greater employees to maintain or on understanding the objectives will be Maori, Pasifika and adopt a healthy lifestyle diverse cultures and delivered Asian representation ethnicities at Chorus Our approach to wellbeing is holistic and caters for diversity through four pillars – physical, career, financial and emotional

Annual Report 2019 81 1

Flexible and adaptable workforce Figure 13: Gender pay gap

Flexible work is considered a key enabler of workforce Career level 3 Career level 4 participation for diverse talent groups. Flex@Chorus, our approach to flexible working, was launched in January 2019 to give our employees greater access to flexible working arrangements. 54% 46% 46% 54%

WOMEN PAID 1.7% MORE THAN MEN WOMEN PAID 3.7% MORE THAN MEN Flexible working Career level 5 Career level 6 arrangements 55 in place. 43% 57% 33% 67%

Changed working WOMEN PAID 1% MORE THAN MEN WOMEN PAID 3.9% LESS THAN MEN 26 hours. Career level 7 Career level 8

Working from alternative % % % % locations or on 32 68 31 69 29 an ad hoc basis.

WOMEN PAID 1.2% MORE THAN MEN WOMEN PAID 1% MORE THAN MEN

Figure 14:

Gender by role I am satisfied with our flexible working policy ≥ 8.8 100% (Top 10% in the Technology benchmark*). 80% 29 8.3 40 38 40 38 60% 71 60 62 60 62 My work schedule is flexible 40% enough to accommodate my family or personal life ≥ 8.6 (Top 10% 20%

in the Technology benchmark). 0

8.5 ALL PEOPLE PEOPLE CHORUS LEADERS EXECUTIVE DIRECTORS DIRECTORS NON-EXECUTIVE

* Chorus engagement survey data is provided by Peakon who are able to provide industry sector benchmarks for data comparison. Achieving a score that compares within the top 10% of the industry benchmark is considered best in class.

82 Annual Report 2019 2

Diverse leadership Figure 15:

We’re proud to be close to realising a 40:40:20 gender Ethnicity by role ratio1 in our people leader population as endorsed by the Board in May 2019. Overall gender diversity remained 100% static at 60:40 (male to female) across Chorus, while the proportion of women in leadership roles increased by 3% to 38%. This means our people leaders are close to having a gender ratio reflective of the wider organisation. Women continue to be under-represented at senior levels but they make up 53% of our employee population, in our most junior roles. The gender pay balance is affected by this higher representation of women in junior roles and lower 80% representation in senior roles. We’re committed to closing our gender pay gap by 2022 and have reduced it from 13.3% in 2018 to 11.6% this year. We’re pleased to report that, at equivalent levels in the organisation, there is no gap greater than 3.9%. We had five male and three female directors at 30 June 2019 consistent with the prior year. Non-executive directors were also the same as the previous year at 30 June 2019 with five male and two female non-executive directors. Our executive 60% (officers or senior managers) comprising our CEO and her leadership team, had six male and four female members at 30 June 2019 (30 June 2018: six male and four female). People identifying themselves as Maori, Asian or Pacific peoples continue to be under-represented in the people leader population at Chorus, when compared to the general New Zealand population based on 2013 census data. Ethnicity data for both 2019 and 2018 has been updated to include Filipino employees in the Asian 40% category (previously reported under Pacific Peoples).

Middle Eastern Women working in African

leadership roles Other increased 3% 20% 38% Māori

Asian

European

Pacific Peoples

NZ European

0 PEOPLE LEADERS ALL CHORUS

1 40% men, 40% women, 20% of any/either gender.

Annual Report 2019 83 3

Wellbeing of employees received St John The wellbeing of Chorus employees remains a priority and FY19 saw a focus on mental wellbeing. A Mental mental health Health First Aid certification programme was introduced 20% certification in partnership with St John and 20% of employees received certification. Chorus really cares about In January 2019 we launched wellbeing days, with my mental wellbeing ≥ 8.2 two additional days of leave available to all permanent (Top 10% in the Technology employees to use as they wish, to support their personal wellbeing. This initiative received overwhelmingly positive 8.3 benchmark). support from our people.

Working here, I feel that I can live a physically healthy lifestyle ≥ 8.1 (Top 10% in the 8.1 Technology benchmark).

4

Inclusive culture People from all backgrounds are treated fairly at Chorus Established in 2017, the UP women’s leadership programme is in its third year and continues to increase confidence ≥ 9.1 (Top 10% in the and presence in our women leaders, encouraging them 8.5 Technology benchmark). to step into more senior roles. Women’s networks are now established across the business and, from the success of these, further networks continue to develop. I am treated like a valued member of Chorus ≥ 9.1 We proudly received Rainbow Tick certification in 2019. (Top 10% in the Technology This recognises Chorus as a workplace that understands, values and welcomes sexual and gender diversity. Being 8.0 benchmark). selected as finalists in the New Zealand Rainbow Excellence Awards was further recognition of our work to build an inclusive culture. We were honoured to be awarded the Overall engagement Partner’s Life Emerging Award for organisations early in score for Rainbow the journey of support for the rainbow community. Community is just above 7.7 the Chorus population.

Overall result for the Organisational Fit dimension is the same 8.3 as the Chorus population.

84 Annual Report 2019 Remuneration and performance

Our remuneration model Remuneration is governed by the Board, assisted by the Our remuneration model is designed to enable the PPCC. The PPCC supports the Board by overseeing our achievement of our strategy, whilst ensuring that remuneration strategy and policy. remuneration outcomes align with employee and shareholder interests.

Figure 16:

Our remuneration policy is designed around six guiding principles:

Remuneration principles What does this mean?

Fair to all - employees and shareholders, sharing Commitment to pay equity and alignment with our 1 in the success of Chorus. shareholders’ expectations.

2 Supports a Performance focused culture. Rewards aligned with performance.

We have a diverse workforce and aim to provide 3 Valued by our people. an appropriate suite of rewards that provide value, now and in the future.

Simplicity promotes understanding, 4 Simple to understand and administer. clarity and fairness perception.

We ensure we are not over or underpaying our people through 5 Market — aligned with our competitors. robust market analysis that guides our decisions on remuneration.

Supports our vision, mission, values, 6 Point of difference — how we know it is Chorus. purpose and employee value proposition.

For FY19 all employees had fixed remuneration, targeted at Fixed remuneration the market median and the potential to earn a Short Term Fixed remuneration (not at risk) consists of base salary and Incentive (STI). other benefits including KiwiSaver. Fixed remuneration The CEO and members of the executive leadership team is adjusted each year based on data from independent also had the potential to earn a Long Term Incentive (LTI). remuneration specialists. Employees’ fixed remuneration is Both STI and LTI are deemed at risk because the outcome is based on a matrix of their own performance and their current determined by performance against a combination of pre- position when compared to the market. determined financial and non-financial objectives.

Annual Report 2019 85 Short term incentive Fundamental to the Chorus STI structure is a gateway goal. Short term incentive payments (STIs) are an at risk The philosophy of the gateway goal is to provide a preliminary component set as a percentage of fixed remuneration, from threshold of financial success and affordability, before any 5% to 30% based on the complexity of the role (the CEO’s other measures can be considered for potential STI payments. STI is a higher percentage of fixed remuneration as set out If the gateway goal is not achieved, then no STI is payable. later in this report). STI payments are determined following Individual performance goals for all employees are tailored a review of Company and individual performance and paid to their role, with 70% of the goals based on what they out at a multiplier of between 0x and 1.75x for the CEO and achieve and 30% based on how they perform their role, executive leadership team, and between 0x and 2.8x for all which includes a health and safety component for all other employees. people leaders. Company performance goals are set and reviewed annually As an example of how the STI is calculated, an employee by our Board to ensure appropriate focus on areas which will with fixed remuneration of $80,000 and an STI element enhance shareholder value over the longer term. A focus on of 10% may receive between $0 and $22,400 (0x to 2.8x the customer experience continued to be a feature for the their STI percentage) depending on the level of company FY19 STI measures. performance and their individual performance.

Figure 17: During the course of FY19 we conducted a review of our total reward strategy. The review focused on strengthening the FY19 STI Goals alignment of our remuneration strategy to performance and delivery of long term sustainable returns for shareholders. The anticipated result is that only our most senior employees will be eligible for a STI in FY20. The Board strongly believe that this model will drive the performance culture required 20% 20% to deliver value for shareholders.

Long term incentives We offer long term incentives (LTI) under an executive LTI 30% 30% share scheme to reward and retain key executives. The LTIs Connections are an at risk payment designed to align the interests of Strategic & transformation initiatives executives and shareholders and encourage longer term EBITDA decision making. Customer experience The LTI is described in more detail in Note 16 of the financial statements on page 56. FY20 STI goals EBITDA Increased to 40% to align with objective of modest growth Customer Reduced to 20% following completion of experience major customer projects in FY19 Connections Maintained at 20%, but with focus shifted from total connections (FY19) to revenues, to better reflect higher value of broadband connections over voice only lines Strategic and No change. transformation initiatives

86 Annual Report 2019 Chief Executive remuneration CEO remuneration consists of fixed remuneration, an STI 4,000 and an LTI. In addition to participating in the Executive LTI scheme, on her appointment the Board granted Kate

McKenzie a one time LTI (‘Extended LTI’) to recognise and Thousands$ 3,000 12% reward the potential to add significant shareholder value through an increase in total shareholder return over and 16% above that rewarded by the executive LTI scheme. Our CEO 2,000 50% continues to have a significant portion of her remuneration 36% linked to performance and at risk. Total remuneration for 1,000 our CEO continues to be determined using a range of external factors, including advice from external remuneration 100% 48% 38% specialists and is reviewed annually by the Board, on advice 0 from the PPCC. FIXED ON-PLAN MAXIMUM

CEO remuneration performance pay Base Long-term incentives Annual variable The scenario chart below demonstrates the elements of the CEO remuneration design in the year ended 30 June 2019.

CEO remuneration for FY18 and FY19 was:

Fixed remuneration Pay for performance Total remuneration

Salary STI LTI

Kate McKenzie FY19 1,224,000 844,560 1 – 2,068,560 FY182 1,200,000 1,019,475 3 – 2,219,475

1 STI for FY19 performance period (paid FY20). 2 Kate McKenzie became CEO on 20 February 2017. 3 STI for FY18 performance period (paid FY19). Other benefits paid to Kate McKenzie:Company Kiwisaver contributions: FY19: $67,372 (FY18: $47,220)

Five year summary of CEO remuneration:

% STI extension % LTI replacement % STI awarded awarded against % LTI awarded awarded against Span of LTI CEO Total remuneration against maximum maximum against maximum maximum performance period

Kate McKenzie FY19 2,068,560 53% – – – – FY18 2,219,475 65% – – – – Mark Ratcliffe FY18 – – – 89% – FY15 – FY18 1 FY17 1,981,987 48% – 100% 100% FY15 – FY17 FY16 2,249,276 75% 100% 70% – FY13 – FY15 FY15 1,877,143 57% 100% 69% – FY12 – FY14

1. Three year grant made 1 July 2015.

Annual Report 2019 87 The table below outlines the CEO’s STI, LTI and extended LTI schemes for the performance period ending 30 June 20191:

Description Performance measures Percentage achieved

STI Set at 75% of base remuneration. • Company performance – see 92% Based on key financial and non- figure 17 on page 86 for weightings. financial performance measures. • Individual performance – based on business fundamentals (both financial and non-financial), connections, customer experience and strategic initiatives.

LTI Three-year grant made September Chorus TSR performance over grant Assessed September 2017, equivalent to 33% of base period must exceed 10.6% on an 2020 with possible remuneration. annualised basis, compounding. retesting up to September 2021.

Three-year grant made September Chorus TSR performance over grant Assessed September 2018, equivalent to 33% of base period must exceed 10.4% on an 2021 with possible remuneration. annualised basis, compounding. retesting up to March 2022

Extended LTI One-time four-year grant calculated by Annualised TSR performance over Assessed February 2021. reference to the increase in TSR over and grant period must exceed average cost above that rewarded by the executive of equity over the period plus 1%. LTI scheme capped at NZ$2,000,000.

1 The STI payments for FY19 will be paid in FY20.

Total Shareholder Return (TSR) performance

350.00

300.00

250.00

200.00

150.00

100.00 Percentage return 50.00

0.00

-50.00 30 June 30 June 30 June 30 June 30 June 30 June 2014 2015 2016 2017 2018 2019

NZX50 Chorus

The graph above shows Chorus’ TSR performance against the NZX50 between 30 June 2014 and 30 June 2019.

88 Annual Report 2019 Median pay gap Number of employees in the year The median pay gap represents the number of times greater Remuneration range $ (Gross) ended 30 June 2019 the CEO remuneration is to an employee paid at the median Actual Payment REM only REM including benefits of all Chorus employees. At 30 June 2019, the CEO’s base salary at $1,224,000, was 12.9 times that of the median 1,010,001 – 1,020,000 – 1 employee at $95,228 per annum. 890,001 – 900,000 1 – The CEO’s total remuneration, including STI, was 20.4 870,001 – 880,000 1 1 times the total remuneration of the median employee 840,001 – 850,000 – 1 (including STI) at $104,971 750,001 – 760,000 1 – Employee remuneration range for the year ended 590,001– 600,000 – 1 30 June 2019 560,001– 570,000 – 1 The table opposite shows the number of employees 510,001 – 520,000 1 – and former employees who received remuneration and 490,001– 500,000 1 1 other benefits in excess of $100,000 during the year ended 480,001 – 490,000 1 – 30 June 2019. 460,001– 470,000 1 1 During the year, certain employees received contributions 410,001– 420,000 1 1 towards membership of the Marram Trust (a community 390,001– 400,000 1 2 healthcare and holiday accommodation provider), received contributions toward their Government Superannuation Fund 380,001– 390,000 1 1 (a legacy benefit provided to a small number of employees) 370,001 – 380,000 1 1 and, if a member, received contributions of 3% of gross 360,001 – 370,000 1 1 earnings towards their KiwiSaver accounts. These amounts 340,001 – 350,000 1 – are not included in these remuneration figures. Any benefits 320,001– 330,000 1 1 received by employees that do not have an attributable value are also excluded. 310,001– 320,000 2 2 300,001– 310,000 2 2 The remuneration paid to, and other benefits received by, Kate McKenzie in her capacity as CEO are detailed on 290,001– 300,000 6 6 page 87, and are excluded from the table opposite. 280,001– 290,000 4 4 270,001– 280,000 5 5 The Living Wage in FY19 was $20.55 per hour. Chorus does not have any permanent employee earning less than the 260,001– 270,000 3 3 current living wage. 250,001– 260,000 4 4 240,001– 250,000 7 8 230,001– 240,000 7 7 220,001– 230,000 11 11 210,001– 220,000 8 8 200,001– 210,000 12 12 190,001– 200,000 11 11 180,001– 190,000 21 21 170,001– 180,000 23 23 160,001– 170,000 41 41 150,001– 160,000 30 30 140,001– 150,000 45 45 130,001– 140,000 37 37 120,001– 130,000 54 54 110,001– 120,000 57 57 100,000– 110,000 79 79 Grand Total 483 484

Annual Report 2019 89 Director remuneration Fee structure Total remuneration available to directors (in their capacity as such) in the year ended 30 June 2019 was fixed at our 2016 annual shareholders’ meeting at $1,149,500.

Annual fee structure Year ended 30 June 2019 $ Year ended 30 June 2018 $ Board fees: Board chair 223,650 223,650 Deputy chair 167,750 167,750 Non-executive director 114,000 111,850 Board committee fees: Audit and Risk Management Committee Chair 32,600 32,000 Member 16,300 16,000 People, Performance and Culture Committee Chair 22,900 22,470 Member 11,750 11,500 Nominations and Corporate Governance Committee Chair 16,720 16,720 Member 8,880 8,880

Notes: 1 The Board chair and deputy chair receive Board fees only. Other directors receive committee fees in addition to their Board fees. 2 Directors (except the CEO) do not participate in a bonus or profit-sharing plan, do not receive compensation in share options, and do not have superannuation or any other scheme entitlements or retirement benefits. 3 Directors may be paid an additional daily rate of $2,400 for additional work as determined and approved by our chair and where the payment is within the total fee pool available. In the year to 30 June 2019 $7,200 was paid to Anne Urlwin for her additional work on one of our Due Diligence Committee’s as noted in the table below. 4 Director base fees, and some committee fees were increased in the year to 30 June 3019 by ~1% - 2%. Board chair and deputy chair fees did not increase. Fees paid to Directors (in their capacity as such) in the year ended 30 June 2019

Director Total fees1 $ Board fees ARMC PPCC NCGC DDC Patrick Strange 223,650 223,650 - Jon Hartley 167,750 167,750 - - Mark Cross 130,300 114,000 16,300 Prue Flacks 145,780 114,000 22,900 8,880 Murray Jordan 125,750 114,000 11,750 Jack Matthews 125,750 114,000 11,750 Anne Urlwin 153,800 114,000 32,600 7.200 Kate McKenzie2 – – Total

Notes: 1 Amounts are gross and exclude GST (where applicable). 2 Kate McKenzie as CEO did not receive any remuneration in her capacity as a director. 3 Directors (other than the CEO) did not receive any other benefits. 4 Directors are entitled to be reimbursed for travel and incidental expenses incurred in performance of their duties in addition to the above fees. Fee structure from 1 July 2020 Our PPCC reviews non-executive director remuneration annually based on criteria developed by that committee. Based on that committee’s recommendation the Board has determined not to change Board fees for the year from 1 July 2019.

90 Annual Report 2019 Disclosures

Group structure Indemnities and insurance Chorus Limited has two wholly owned subsidiaries: Chorus indemnifies directors under our constitution for Chorus New Zealand Limited (CNZL) and Chorus LTI Trustee liabilities and costs they may incur for their acts or omissions Limited (CLTL). as directors (including costs and expenses of defending actions for actual or alleged liability) to the maximum Chorus Limited extent permitted by law. We have also entered into deeds of indemnity with each director under which: • Chorus indemnifies the director for liabilities incurred in their capacity as a director and as officers of other Chorus Chorus New Zealand Limited Chorus LTI Trustee Limited companies. • Directors are permitted to access company records while Chorus Limited is the entity listed on the NZX, ASX and directors and after they cease to hold office (subject to Luxembourg stock exchanges. It is also the borrowing entity certain conditions). under the group’s main financing arrangements and the entity which has partnered with the Crown for the UFB build. Deeds of indemnity have also been entered into on similar terms with certain senior employees for liabilities and costs CNZL undertakes (and is the contracting entity for) Chorus’ they may incur for their acts or omissions as employees, operating activities and is the guarantor of Chorus Limited’s directors of subsidiaries or as directors of non-Chorus borrowing. CNZL also employees all Chorus people. CNZL companies in which Chorus holds interests. has its own constitution but its Board is the same as the Chorus Limited Board. We have a directors’ and officers’ liability insurance policy in place covering directors and senior employees for liability CLTL was incorporated in December 2014 as trustee for our arising from their acts or omissions in their capacity as long term incentive plan. directors or employees on commercial terms. The policy Disclosures in respect of CNZL and CLTL are set out in the does not cover dishonest, fraudulent, malicious or wilful acts “Subsidiaries” section on page 98. or omissions. Director change No directors resigned or were appointed in the year to 30 June 2019.

Annual Report 2019 91 Director interests and trading As at 30 June 2019, directors had a relevant interest (as defined in the Financial Markets Conduct Act 2013) in approximately 0.059% of shares as follows:

Current Directors

Interest as at 30 June 2019 Transactions during the reporting period Director Shares Interest Number Nature of transaction Consideration Date of shares Patrick Strange 35,000 Beneficial owner as 10,000 On market acquisition $44,200.00 28 August 2018 beneficiary of Three Kings Trust Mark Cross 22,505 Beneficial owner as 310 Acquisition of shares on $1,449.43 9 October 2018 beneficiary of Alpha reinvestment of dividends Investment Trust; power to under Chorus’ dividend exercise voting rights and reinvestment plan acquire/dispose of financial 10,000 On market acquisition $58,800.00 1 April 2019 products as director of 195 Acquisition of shares on $1,087.23 16 April 2019 trustee. reinvestment of dividends under Chorus’ dividend reinvestment plan Prue Flacks 14,687 Registered holder and 303 Acquisition of shares on $1,416.70 9 October 2018 beneficial owner reinvestment of dividends under Chorus’ dividend reinvestment plan 2,480 On market acquisition $14,582.40 2 April 2019 190 Acquisition of shares on $1,059.36 16 April 2019 reinvestment of dividends under Chorus’ dividend reinvestment plan Murray Jordan 32,625 Registered holder and 10,000 On market acquisition $44,200.00 28 August 2018 beneficial owner of ordinary 810 Acquisition of shares on $3,787.23 9 October 2018 shares as trustee and reinvestment of dividends beneficiary of Endeavour under Chorus’ Dividend Trust Reinvestment Plan 509 Acquisition of shares on $2,837.96 16 April 2019 reinvestment of dividends under Chorus’ Dividend Reinvestment Plan Jack Matthews 10,000 Registered holder and 10,000 On market acquisition $52,199.00 5 March 2019 beneficial owner Anne Urlwin 19,767 Director and shareholder of 5,000 On market acquisition $22,374.54 29 August 2018 registered holder 491 Acquisition of shares on $2,295.71 9 October 2018 reinvestment of dividends under Chorus’ Dividend Reinvestment Plan 308 Acquisition of shares on $1,717.27 16 April 2019 reinvestment of dividends under Chorus’ Dividend Reinvestment Plan Kate McKenzie 123,957 Beneficial interest 58,095 Off market purchase of $265,320.00 31 August 2018 under Chorus’ long term shares granted under incentive plan Chorus’ long term incentive plan

92 Annual Report 2019 As at 30 June 2019, no directors had relevant interests (as defined in the Financial Markets Conduct Act 2013) in any Chorus’ NZX bonds maturing May 2021. As at 30 June 2019, directors had a relevant interest (as defined in the Financial Markets Conduct Act 2013 in approximately 0.111% of Chorus’ NZX bonds maturing December 2028 as follows:

Interest as at 30 June 2019 Transactions during the reporting period Director Bonds Interest Number Nature of transaction Consideration Date of bonds Patrick Strange 340,000 Beneficial owner 340,000 Acquisition of $340,000.00 6 December 2018 as beneficiary of bonds on issue Three Kings Trust Prue Flacks 15,000 Registered holder 15,000 Acquisition of $15,000.00 6 December 2018 as trustee of CJH bonds on issue Bull Family Trust Murray Jordan 100,000 Registered holder and 100,000 Acquisition of $100,000.00 6 December 2018 beneficial owner as bonds on issue trustee and beneficiary of Endeavour Trust Jon Hartley 70,000 Beneficial owner as 35,000 Acquisition of $35,000.00 6 December 2018 trustee and beneficiary bonds on issue of Hartley Family Trust 35,000 On market acquisition $36,957.45 22 May 2019

Anne Urlwin 30,000 Director and 30,000 Acquisition of $30,000.00 6 December 2018 shareholder of bonds on issue registered holder

Changes in Director interests

Patrick Strange Became chair of Auckland International Airport Limited (previously a director). Ceased as a director of NZX Limited. Jon Hartley Became chair of Timberlands Limited. Ceased as deputy chair of Sovereign Assurance Company Limited, a member of the Ministry of Business Innovation and Employment Risk Advisory Committee and as a trustee of World Vision NZ. Mark Cross Ceased as a director of Argosy Property Limited, Genesis Energy Limited, Aspect Productivity Technology Limited and Challenge Petroleum Limited, and as a Board member of Triathlon New Zealand Incorporated. Prue Flacks Became chair of Mercury NZ Limited1. Murray Jordan Became a trustee of the Foodstuffs' Members Protection Trust and the Foodstuffs Co-operative Perpetuation Trust. Murray will become a Trustee of Southern Cross Health Trust2 which has 2 subsidiaries which Murray will be a director of - Southern Cross Hospitals Limited and Southern Cross Benefits Limited. Jack Matthews Became a director of Plexure Group Limited3 and Bravo TV New Zealand Limited, and a director and shareholder of PI Meson Limited. Ceased as a director of APN Outdoor Group Limited, Trilogy International Limited and The Network for Learning Limited. Anne Urlwin Became a director of Tilt Renewables group companies, Tararua Wind Power Limited, Waverley Wind Farm Limited and Waverley Wind Farm (NZ) Holding Limited4. Ceased as a director of Hockey New Zealand. Kate McKenzie None for the year.

Notes: 1 From 27 September 2019. 2. From 1 August 2019. 3. From 1 July 2019. 4. From 4 July 2019.

Annual Report 2019 93 Director restrictions • In 2012 that the Crown approved AMP Capital Holdings No person who is an ‘associated person’ of a Limited and its related companies acquiring a relevant telecommunications services provider in New Zealand interest in up to 15% of our shares. may be appointed or hold office as a director. NZX has If our Board or the Crown determines there are reasonable granted a waiver to allow this restriction to be included grounds for believing a person has a relevant interest in our in our constitution. shares in excess of the ownership restrictions, our Board Securities and security holders may, after following certain procedures, prohibit the exercise of voting rights (in which case the voting rights vest in our Ordinary shares chair) and may force the sale of shares. Our Board may also Chorus Limited’s shares are quoted on the NZX and on decline to register a transfer of shares if it reasonably believes the ASX and trade under the ‘CNU’ ticker. There were the transfer would breach the ownership restrictions. 439,288,154 ordinary shares on issue at 30 June 2019 and NZX has granted waivers allowing our constitution to include 31 July 2019. Each share confers on its holder the right to the power of forfeiture, the restrictions on transferability attend and vote at a shareholder meeting (including the of shares and our Board’s power to prohibit the exercise of right to cast one vote on a poll on any resolution). voting rights relating to these ownership restrictions. ASX has also granted a waiver in respect of the refusal to register Constitutional ownership restrictions a transfer of shares which is or may be in breach of the Ownership restrictions carried through at demerger and ownership restrictions. incorporated into our constitution in agreement with the Crown require prior Crown approval for any person to: Takeovers protocol • Have a relevant interest in 10% or more of our shares; or We have established a takeovers protocol setting out the procedure to be followed if there is a takeover offer, • Other than a New Zealand national, have a relevant interest including managing communications between insiders in more than 49.9% of our shares. and the bidder and engagement of an independent We were advised: adviser. The protocol includes the option of establishing an independent takeover committee, and the likely • In December 2017 that the Crown approved certain funds composition and implementation of that committee. managed by L1 Capital Pty Ltd having a collective relevant interest in up to 15% of our shares.

Shareholder distribution as at 31 July 2019

Holding Number of holders % of holders Total number of % of shares issued shares held 1 to 999 11,525 55.32% 4,732,698 1.08% 1,000 to 4,999 5,995 28.78% 14,020,838 3.19% 5,000 to 9,999 1,813 8.70% 11,993,588 2.73% 10,000 to 99,999 1,421 6.82% 29,593,148 6.74% 100,000 and over 79 0.38% 378,947,882 86.26% Total 20,833 100% 439,288,154 100%

Substantial holders We have received substantial product holder notices from shareholders as follows:

Notices received as at 30 June 2019 Notices received as at 31 July 2019 Number of % of shares on issue Number of % of shares on issue ordinary shares held ordinary shares held L1 Capital Pty Ltd 63,601,466 14.80%1 63,601,466 14.80% Commonwealth Bank of Australia 21,536,089 5.013%1 21,536,089 5.013% The Vanguard Group, Inc. 23,418,083 5.370%2 23,418,083 5.370%

1 As reported in the substantial product holder notice, based on 429,641,197 ordinary shares on issue at that time. 2 As reported in the substantial product holder notice, based on 436,075,010 ordinary shares on issue at that time.

94 Annual Report 2019 Twenty largest shareholders as at 31 July 2019

Rank Holder name Holding % 1 JP Morgan Nominees Australia Limited 47,944,845 10.91 2 HSBC Custody Nominees (Australia) Limited 43,828,962 9.97 3 HSBC Custody Nominees (Australia) Limited 33,215,581 7.56 4 Citibank Nominees (New Zealand) Limited* 30,793,421 7.00 5 National Nominees Limited 24,502,026 5.57 6 HSBC Nominees (New Zealand) Limited* 21,257,287 4.83 7 Accident Compensation Corporation* 20,141,794 4.58 8 JP Morgan Chase Bank Na Nz Branch-Segregated Clients Acct* 19,942,864 4.53 9 Citicorp Nominees Pty Limited 18,714,569 4.26 10 HSBC Nominees (New Zealand) Limited A/C State Street* 17,911,537 4.07 11 L1 Capital Pty Ltd Special Situations 14 A/C 11,410,000 2.59 12 BNP Paribas Nominees Pty Ltd Agency Lending Drp A/C 7,521,353 1.71 13 FNZ Custodians Limited 5,975,661 1.36 14 New Zealand Depository Nominee Limited A/C 1 Cash Account 5,144,852 1.17 15 Forsyth Barr Custodians Limited <1-CUSTODY> 4,713,438 1.07 16 HSBC Custody Nominees (Australia) Limited Nt-Comnwlth Super Corp A/C* 4,646,045 1.05 17 ANZ Wholesale Australasian Share Fund* 4,636,252 1.05 18 JBWere (NZ) Nominees Limited NZ Resident A/C 4,371,335 0.99 19 ANZ Custodial Services New Zealand Limited* 4,132,833 0.94 20 BNP Paribas Nominees (NZ) Limited* 3,883,948 0.88

* Held through New Zealand Central Securities Depository Limited (NZCSD). NZCSD provides a custodial service that allows electronic trading of securities by its members. As at 31 July 2019, 137,701,140 Chorus ordinary shares (or 31% of the ordinary shares on issue) were held through NZCSD.

American depositary receipts American Depositary Shares, each representing five shares and evidenced by American Depositary Receipts, are not listed but are traded on the over-the-counter market in the United States under the ticker ‘CHRYY’ with Bank of New York Mellon as depositary bank. As at 30 June 2019 Chorus had 1.2 million ADR’s on issue.

Annual Report 2019 95 Twenty largest bondholders (May 2021) as at 31 July 2019

Rank Holder name Holding % 1 FNZ Custodians Limited 37,297,000 9.32 2 BNP Paribas Nominees (NZ) Limited* 27,865,000 6.97 3 Forsyth Barr Custodians Limited 27,498,000 6.87 4 TEA Custodians Limited Client Property Trust Account* 27,078,000 6.77 5 Custodial Services Limited – A/C 3 19,507,000 4.88 6 Citibank Nominees (New Zealand) Limited 19,503,000 4.88 7 Custodial Services Limited – A/C 4 17,492,000 4.37 8 Investment Custodial Services Limited – A/C C 16,628,000 4.16 9 HSBC Nominees (New Zealand) Limited O/A Euroclear Bank 15,106,000 3.78 10 Custodial Services Limited – A/C 2 13,695,000 3.42 11 JBWere (NZ) Nominees Limited – NZ Resident A/C 9,472,000 2.37 12 NZPT Custodians (Grosvenor) Limited* 8,751,000 2.19 13 FNZ Custodians Limited – DTA Non Resident A/C 7,635,000 1.91 14 HSBC Nominees (New Zealand) Limited* 7,517,000 1.88 15 Custodial Services Limited – A/C 1 7,513,000 1.88 16 National Nominees New Zealand Limited* 7,364,000 1.84 17 Custodial Services Limited – A/C 18 6,694,000 1.67 18 JP Morgan Chase Bank NA NZ Branch – Segregated Clients ACCT* 6,652,000 1.66 19 Public Trust Class 10 Nominees Limited* 5,838,000 1.46 20 ANZ Custodial Services New Zealand Limited* 5,281,000 1.32

Twenty largest bondholders (December 2028) as at 31 July 2019

Rank Holder name Holding % 1 Forsyth Barr Custodians Limited – 1-Custody 73,526,000 14.71 2 ANZ Custodial Services New Zealand Limited* 56,163,000 11.23 3 JBWere (NZ) Nominees Limited – NZ Resident A/C 47,061,000 9.41 4 HSBC Nominees (New Zealand) Limited O/A Euroclear Bank* 30,000,000 6.00 5 FNZ Custodians Limited 23,973,000 4.79 6 Custodial Services Limited – A/C 4 21,109,000 4.22 7 Investment Custodial Services Limited – A/C C 19,328,000 3.87 8 Custodial Services Limited – A/C 3 15,823,000 3.16 9 BNP Paribas Nominees (NZ) Limited* 15,075,000 3.02 10 Custodial Services Limited – A/C 2 13,174,000 2.63 11 Custodial Services Limited – A/C 1 11,033,000 2.21 12 Custodial Services Limited – A/C 18 6,925,000 1.39 13 JBWere (NZ) Nominees Limited – 54440 A/C 6,850,000 1.37 14 Forsyth Barr Custodians Limited – Account 1 E 6,037,000 1.21 15 JBWere (NZ) Nominees Limited – 55527 A/C 5,000,000 1.00 16 JBWere (NZ) Nominees Limited – 54441 A/C 4,500,000 0.90 17 Generate Kiwisaver Public Trust Nominees Limited* 4,500,000 0.90 18 HSBC Nominees (New Zealand) Limited A/C State Street* 3,750,000 0.75 19 Custodial Services Limited – A/C 16 3,047,000 0.61 20 JBWere (NZ) Nominees Limited – 44626 A/C 3,000,000 0.60

* Held through New Zealand Central Securities Depository Limited (NZCSD).

96 Annual Report 2019 Debt listings Chorus Limited has issued: • EUR 500 million EMTNs traded on the ASX; and • $400 million bonds traded on the NZX debt market • GBP 260 million EMTNs traded on the Luxembourg (the NZDX) maturing May 2021; Stock Exchange. • $500 million bonds traded on the NZDX maturing December 2028;

NZX bondholder distribution as at 31 July 2019 May 2021 maturity

Holding Number of holders % of holders Total number of bonds held % of bonds issued 1,000 to 4,999 0 0% 0 0% 5,000 to 9,999 198 11.70% 1,101,000 0.28% 10,000 to 99,999 1,303 77.01% 34,871,000 8.72% 100,000 and over 191 11.29% 364,028,000 91.00% Total 1,692 100% 400,000,000 100%

December 2028 maturity

Holding Number of holders % of holders Total number of bonds held % of bonds issued 1,000 to 4,999 0 0% 0 0% 5,000 to 9,999 76 4.4% 435,000 0.09% 10,000 to 99,999 1,385 80.34% 44,081,000 8.82% 100,000 and over 263 15.3% 455,484,000 91.09% Total 1,724 100% 500,000,000 100%

Unquoted securities Crown Infrastructure Partners (CIP) Securities The terms of issue for the CIP1 and CIP2 securities are set out in the subscription agreement’s between Chorus Limited and CIP. These terms are summarised in note 6 of our Financial Statements and on our website at www.chorus.co.nz/reports.

Security Number issued in the Total on Holder Percentage held year ended 30 June 2019 issue at 31 July 2019 CIP1 equity securities 50,072,984 430,294,163 CIP 100% CIP1 debt securities 50,072,984 430,294,163 CIP 100% CIP1 equity warrants 1,967,899 12,686,015 CIP 100% CIP2 equity securities 59,897,222 64,182,706 CIP 100%

Annual Report 2019 97 Other disclosures Revenue from ordinary activities and net profit In the year ended 30 June 2019: New NZX listing rules NZX implemented new listing rules from 1 January 2019. • Revenue from ordinary activities decreased 2% to Chorus transitioned to the new rules on 12 February 2019. $970 million (30 June 2018: $990 million); and • Profit from ordinary activities after tax, and net profit, NZX waivers attributable to shareholders decreased 38% to $53 million Chorus relied on NZX’s class ruling dated 19 November 2018 (30 June 2018: $85 million). continuing waivers and rulings granted under the previous listing rules. The class ruling is available until 30 June 2020, Subsidiaries meaning the waivers and rulings granted to Chorus under the previous rules will apply until then (subject to replacement Chorus New Zealand Limited (CNZL) waivers and rulings being granted before). Chorus applied on Directors as at 30 June 2019: Patrick Strange, Jon Hartley, 28 March 2019 for applicable new rulings and waivers to be Mark Cross, Prue Flacks, Murray Jordan, Jack Matthews, granted under the new listing rules. Anne Urlwin, Kate McKenzie. A summary of all waivers granted and published by NZX in No directors resigned from, or were appointed to, CNZL the 12 months ending 30 June 2019 and relied on is available during the year to 30 June 2019. on our website at www.chorus.co.nz/investor-info. Current CNZL directors are also Chorus Limited directors and do not receive any remuneration in their capacity as Non-standard designation CNZL directors. NZX has attached a ‘non-standard’ designation to Chorus Limited because of the ownership restrictions in our Chorus LTI Trustee Limited (CLTL) constitution (described above). Directors as at 30 June 2019: Prue Flacks, Murray Jordan and Jack Matthews. ASX disclosures Chorus Limited and its subsidiaries are incorporated in No directors resigned from, or were appointed to, CLTL New Zealand. during the year to 30 June 2019. Chorus Limited is not subject to Chapters 6, 6A, 6B and 6C Current and former directors of CLTL did not receive any of the Australian Corporations Act 2001 dealing with the remuneration in their capacity as directors of CLTL. acquisition of shares (including substantial shareholdings and takeovers). Other subsidiaries Chorus Limited has no other subsidiaries. Our constitution contains limitations on the acquisition of securities, as described above. For the purposes of ASX listing rule 1.15.3 Chorus Limited continues to comply with the NZX listing rules.

Registration as a foreign company Chorus Limited has registered with the Australian Securities and Investments Commission as a foreign company and has been issued an Australian Registered Body Number (ARBN) of 152 485 848.

Net tangible assets per security As at 30 June 2019, consolidated net tangible assets per share was $1.64 (30 June 2018: $1.78). Net tangible assets per share is a non‑GAAP financial measure and is not prepared in accordance with NZ IFRS.

98 Annual Report 2019 Glossary

ASX Corporate ASX Corporate Governance Council’s FY Financial year – twelve months Governance Code Corporate Governance Principles and ended 30 June. e.g. FY19 is from Recommendations (3rd edition). 1 July 2018 to 30 June 2019. Backbone network Fibre cabling and other shared network Gbps Gigabits per second. A measure of elements required either in the common the average rate of data transfer. areas of multi-dwelling units to connect Gigabit The equivalent of 1 billion bits. Gigabit individual apartments/offices, or to serve Ethernet provides data transfer rates premises located along rights of way. of about 1 gigabit per second. Backhaul The portion of the network that links GPON Gigabit Passive Optical Network. local exchanges to other exchanges or retail service provider networks. IP Internet Protocol. Bandwidth A fibre service that provides dedicated IT Information Technology. fibre access bandwidth between customers Layer 2 The data link layer, including broadband and their retail service provider’s electronics, within the Open Systems equipment in the local exchange. Interconnection model. Layer 1 is the Baseband A technology neutral voice input physical cables and co‑location space. service that can be bundled with Mbps Megabits per second – a measure of a broadband product or provided the average rate of data transfer. on a standalone basis. NZ IFRS International Financial Reporting Board Chorus Limited’s Board of Directors. Standards – the rules that the financial Building block A methodology used for regulating statements have to be prepared by. model monopoly utilities. Under BBM a P2P Where two parties or devices are regulated supplier’s allowed revenue connected point‑to-point via fibre. is equal to the sum of the underlying RAB Regulatory Asset Base refers to components or ‘building blocks’, the value of total investment by a consisting of the return on capital, regulated utility in the assets which depreciation, operating expenditure and will generate revenues over time. various other components such as tax. RBI Rural Broadband Initiative – refers to Chorus Chorus Limited and subsidiaries. the Government programme to improve CIP Crown Infrastructure Partners, and enhance broadband coverage in the Government organisation that rural areas between 2011 and 2016. manages New Zealand’s rollout of share Means an ordinary share in Chorus. Ultra-Fast Broadband infrastructure. TSO Telecommunications Services Commission Commerce Commission – Obligation – a universal service the independent Crown Entity obligation under which Chorus whose responsibilities include must maintain certain coverage and overseeing the regulation of the service on the copper network. telecommunications sector. TSR Total shareholder return. Constitution Chorus Limited’s Constitution. UFB Ultra-Fast Broadband refers to the CPI Consumers Price Index (inflation). Government programme to build a fibre Direct fibre access Also known as ‘dark’ fibre, a fibre service to the premises network to about 85% that provides a point to point fibre of New Zealanders. UFB1 refers to the connection and can be used to deliver original phase of the rollout to 75% of backhaul connections to mobile sites. New Zealanders. UFB2 and UFB2+ were Director A director of Chorus Limited. subsequent phases announced in 2017. EBITDA Earnings before interest, income tax, VDSL Very High Speed Digital Subscriber depreciation and amortisation. Line – a copper‑based technology that provides a better broadband EMTN European Medium Term Notes. connection than ADSL.

Annual Report 2019 99 Disclaimer

This annual report: • May contain forward looking statements. These statements are not guarantees or predictions of future performance. They involve known and unknown risks, uncertainties and other factors, many of which are beyond Chorus’ control, and which may cause actual results to differ materially from those expressed in the statements contained in this annual report. • Includes statements relating to past performance. These should not be regarded as reliable indicators of future performance. • Is current at its release date. Except as required by law or the NZX and ASX listing rules, Chorus is not under any obligation to update this annual report or the information in it at any time, whether as a result of new information, future events or otherwise. • Contains non-GAAP financial measures, including EBITDA. These measures may differ from similarly titled measures used by other companies because they are not defined by GAAP. Although Chorus considers those measures provide useful information they should not be used in substitution for, or isolation of, Chorus’ audited financial statements. • May contain information from third parties Chorus believes reliable. However, no representations or warranties are made as to the accuracy or completeness of such information. • Should be read in the wider context of material previously published by Chorus and released through the NZX and ASX. • Does not constitute investment advice or an offer or invitation to purchase Chorus securities.

100 Annual Report 2019 Annual Report 2019 101 Directory

Registrars NEW ZEALAND Computershare Investor Services Limited Private Bag 92119, Victoria Street West Auckland 1142, New Zealand P: +64 9 488 8777 F: +64 9 488 8787 E: [email protected] investorcentre.com/nz AUSTRALIA Computershare Investor Services Pty Limited GPO Box 3329, Melbourne 3001, Australia FP: 1 800 501 366 F: +61 3 9473 2500 E: [email protected] investorcentre.com/nz

Registered Offices NEW ZEALAND Level 10, 1 Willis Street Wellington, New Zealand P: +64 9 975 2983 AUSTRALIA C/ – Allens Corporate Services Pty Limited Level 4, Deutsche Bank Place, 126 Phillip Street, Sydney, NSW 2000, Australia P: +61 2 9230 4000

ADR Depository BNY Mellon Shareowner Services PO Box 505000, Louisville, KY 40233-5000 United States of America P: US domestic calls (toll free) 1 888 269 2377 P: International calls +1 201 680 6825 E: [email protected] www.mybnymdr.com ARBN 152 485 848

chorus.co.nz